The financial question: When will the annual lease worth

Recently cost loan with a ten-year fixed interest rate only 4 percent per year. These beautiful days are over. That bargain hunter No wonder open to alternatives. And there is.

The great time in the ten-year loans with fixed interest rates only cost 4 percent per year, is over. Today at least 5 percent must be placed on the table for such mortgages each year. These are in a credit of 100,000 euros, which will be repaid over 30 years, monthly while only 59.40 Euro more, but it adds up over time to 21,384 euros, so it is no wonder that bargain hunters always a who listen to alternatives.

An interesting way to save the construction or purchase of a property, the ground lease can be. Here, investors are not owners but tenants of the property. You earn the right for a long time – often 99 years – to use the land. In return, they pay the owner the annual lease. He stood for decades in reputation, especially for families who have to count every penny to be an alternative to the mortgage. Therefore, many parties are working for the strengthening of the ground lease. But critics say that the ground lease was not so favorable. Sometimes it is even more expensive than the mortgage.

The truth lies here in the middle. The leasehold can be cheaper than a mortgage, but if the communities, churches, and foundations tuck in neatly at Erbbau, the benefits there. This is evident in the following example. A father is 35 years old and looking for a plot for the construction of their home. He offered two plots, which each cost 150,000 euros. The first property is offered for 99 years in the long lease, the second property is for sale. The annual ground rent is 4 percent of the land value, or 6,000 euros a year. Alternatively, it can take out a loan over 150,000 euros. For a nominal interest rate of 5 percent and a repayment of one percent per month 750 euros must be paid, and it takes about 36 years until the debts are removed.

When comparing the two offers, it is obvious to add the payments. When Erbbau 99 charges will apply à 6000 euros, makes 594,000 euros. When mortgage rates are 432 à 750 euros due so that together 324,000 euros. This is, at first sight, a difference of 270 000 euros. but on closer inspection, there are even 420,000 euros, because the property passes into the ownership of the investor purchase.

The addition of the numbers is certainly dangerous because of money and time will be misjudged because of the lack of interest. In the present case, it is questionable as to compare maturities of 99 and 36 years. Similarly, it is problematic that different loads, here 6000 euros per year, there 750 Euros, to be treated equally. In order to get the thing under control, the term of the agreements must be adapted on the one hand, and on the other hand, the differences between the two payments should be remunerated.

The biggest problem is the term. The ground lease is granted 99 years, and the mortgage runs 36 years. In practice, the investor will coincide with the two terms on the abdomen. The leasehold is about the death of the investor out, and the repayment period of the mortgage may be too short. The most viable compromise is most likely the personal life of the house. These are in this case probably 50 years if the investor wants to live in the house until death.